Molten copper is poured at Xstrata's Kidd Creek facility in Timmins, Ont.
Copper shed 3 per cent on Thursday after softer-than-expected Chinese trade data underscored concerns the metal-consuming giant's may be unable to sustain its growth trend in a slowing global economy.
The data, which showed the country's trade surplus narrowed for a second straight month in September as both imports and exports slowed, pulled copper down from a two-week high above $7,500 (U.S.) a tonne. The data followed a Financial Times report on Wednesday that said China's inventory of copper was much higher than had been widely perceived.
"The fact that the trade surplus is down for the second month running is raising questions about whether China can decouple from the G3 (United States, Japan and Germany)," said Robin Bhar, analyst at Credit Agricole. "That is putting pressure on commodities and copper in particular."
London Metal Exchange (LME) benchmark copper dropped $219 or 3 per cent to end at $7,310 a tonne, pulling back from a two-week high on Wednesday at $7,544.75.
In New York, the key December COMEX contract lost 8.65 cents or 2.55 per cent to settle at $3.3070 per pound, after dealing between $3.2860 and $3.3745.
Volumes picked up a bit on Thursday from the week's generally slow pace. About 58,000 lots traded in New York, up more than 5 per cent from the 30-day norm and at their highest level in nearly a week, according to preliminary Thomson Reuters data.
The day began with the market reacting to a late-Wednesday report from the Financial Times, saying a Chinese industry group had told officials at a September International Copper Study Group meeting that the country's stocks had reached a surprisingly high 1.9 million tonnes.
The report threw into question China's demand requirements for the year, worrying a market dependent on the country's near 40-per cent global intake of copper.
"It means that there will be much less copper bought in the near future even if China's economic prospects brighten measurably," said Dennis Gartman of The Gartman Letter.
Trade data later in the day added to the pessimistic tone. China's September exports rose 17.1 per cent, from a 24.5-per cent gain in August, while imports rose 20.9 per cent, down from August's rise of 30.2 per cent.
"The trade numbers were the big disappointment," said Bart Melek, head commodity strategist with TD Bank Financial Group.
"The fear that is that if it slowing down a little bit on its own, and then add the big impact from the export side, you could have a hard landing there. I think that is the concern."due on Friday for clues to the future direction of monetary policy, which has been on a tightening trajectory since last year.
Mildly positive U.S. data on Thursday failed to inspire. Weekly jobless claims steadied last week and the trade deficit narrowed slightly in August.
CAUTION WARRANTED On the plus side however, Chinese imports of copper rose 11.8 per cent in September to a 16-month high, with expectations that the trend could continue for the rest of this year if prices stay around current levels.
Stocks of copper in LME approved warehouses fell by 3,900 tonnes to 453,100 tonnes, down nearly 5 per cent since the start of October.
Even more positive is the amount of copper – 32,725 tonnes – waiting to leave warehouses in South Korea for destinations in China, traders said.
Canceled warrants – material tagged for delivery – in LME warehouses are rising. "It is reassuring to see that canceled warrants ... in Asia went up," said Nic Brown, analyst at Natixis.
"Now we're also seeing the follow-on from that: a decline in stockpiles, as metal is taken out of those warehouses and shipped over to China."